In Ancient Rome, military commanders often turned to oracles known as Auspex (also known as augurs) to predict the outcomes of battles. Wars were costly, and failures were even more so. Generals had a strong incentive to win.
These predictions weren’t exactly scientific. Many augurs used chickens to divine the future, while others relied on birdsong and flight. (Roman armies were fortunately disciplined and well-organized enough to overcome this handicap.)
But the field of auguring eventually improved.
In the 6th century, chess was invented to help noblemen learn the art of war. This eventually evolved into Kriegsspiel, a Prussian war game that was so realistic that militaries began using it to plan battles.
Today, modern militaries churn through massive amounts of satellite information and real-world data with human analysts and artificial intelligence. A computer can simulate entire battles without a shot ever being fired.
And it’s not only the military that now uses these data-driven simulations. Companies use predictive models to forecast demand… weather forecasters use simulations to determine the chance of rain…
And savvy investors often use these same tools to figure out what’s coming next in the market.
Today, we’re no longer forced to invest based on “gut feeling” or watching chickens dance. Instead, we can use the incredible amounts of data that the stock market produces to make better investing decisions.
I’ve used these tools to guide my recommendations. Last year, I launched MarketMaster, a quant-driven tool that helps “nudge” people toward stocks likely to outperform over longer periods. “A+” rated companies from the most recent June recommendations rose 6.1% in three months and 13.1% in six – beating the market average of 3.9% and 12.6%, respectively.
Some systems are even better, especially at divining returns over the short term.
Luke has created a way to make long-term gains over the short term, all while decreasing your exposure to sudden drops in the market.
All you need to do is click here to sign up.
In the meantime, conservative investors can take heart. Today, I’m sharing my “best of the best” picks that should do well over the coming year. This week’s five picks are divided into three Dividend Kings and two Tech Growers.
Dollar General Corp. (DG) is the largest of the three major dollar stores in America. The company operates 20,000 stores spread across the country and targets rural communities too small to be served by big-box retailers. In short, DG is a relatively bare-bones convenience store that serves customers between their weekly shopping trips to larger towns.
The strategy has worked. Over the past 25 years, Dollar General has built a reputation for low prices, and used its immense cash flows to expand its footprint five-fold.
New stores pay for themselves in as quickly as four years (compared to industry averages of closer to 10 years), so the profits from one store can quickly fund a second location… then four… eight… 16, and so on. It’s an example of a “perpetual money machine” that uses strong cash flows to generate even more cash flows in the future.
The firm additionally has one of the best logistics networks of any retailer, rivaled only by the top big-box retailers.
That said, the past four years have been challenging for Dollar General. Consumer confidence among the company’s rural-based customers has remained low under the Biden administration. DG saw its same-store sales decline from its long-term average of 4.7% to just 2.3%. In the most recent quarter, that figure sat at 0.2%.
That stands to change with a new administration. On December 5, management announced that same-store sales had ticked up 1.3%, outperforming consensus estimates of 1.1%. The firm also noted that November sales exceeded the midpoint of expectations.
The company’s 3.1% dividend yield also remains safe. Net income is expected to bottom out at $1.3 billion next year, far exceeding the $550 million DG is expected to pay out. (The only time DG was forced to cut its dividend since 2000 was during the U.S. financial crisis.)
That makes Dollar General’s shares too cheap to ignore. The company trades for just 13 times forward earnings — less than half of what competitor Walmart Inc. (WMT) fetches. Its dividend yields a quarter higher than the 2.5% average seen by the Dividend Aristocrats. And a sudden resurgence in same-store sales growth will immediately shift sentiment positive again.
Though the past four years might have been difficult for Dollar General, the changing tide of rural consumer sentiment makes DG my No. 1 pick for 2025.
Pfizer Inc. (PFE) shares were bid to the moon during the Covid-19 pandemic. The drugmaker had some of the best vaccines and treatments for the virus, and investors believed the good times could last forever. PFE shares nearly doubled to $59.
Following the pandemic, things have not gone as planned.
Since 2022, demand for Pfizer’s Covid treatments and vaccines has shrunk. The nomination of vaccine skeptic Robert F. Kennedy Jr. as the head of the Department of Health and Human Services has pushed shares further into the mid-$20 range, a 58% decline from peak levels.
So, now investors are acting like bad times will last forever.
However, that leaves us with a Dividend King that’s too cheap to ignore.
Even without Covid-19 sales, Pfizer remains a diversified, well-run pharma company with multiple blockbusters spanning oncology, immunology, and more. The company also has one of the best pipelines of drugs in the approval stage in the industry, and a sales team that can turn promising drugs into blockbusters.
This will blunt the effect of several patent expirations through 2027. Analysts are projecting earnings per share to rebound to $1.81 this year (up from $0.37 last year) and to hit $2.31 in 2025. Shares trade at an astonishingly low 10X forward earnings, suggesting a 40% upside.
The company’s dividend, which currently represents a 6.6% yield (160% higher than the average Dividend Aristocrat!), also remains safe thanks to a reasonable 1.7X coverage ratio – the ratio of dividends to net income. In other words, Pfizer’s profits are high enough that its earnings per share exceed its dividends per share by 70%.
Though Pfizer might take longer than Luke’s Auspex stocks to rise in 2025, the wait will be worth it for this excellent business.
Last October, I introduced Realty Income Corp. (O) as a company to buy in the middle of election chaos. The firm is one of the best-run real estate investment trusts (REITs) in America, and its “triple net” leases make it a highly stable, cash-producing enterprise. Triple net leases are when tenants absorb costs like taxes, insurance, maintenance, and utilities in addition to rent.
A recent price dip makes Realty Income my No. 3 stock for 2025. Shares now value the company at just 1.3 times book value, creating a rare chance to enter at a 5.7% dividend yield – more than twice the Dividend Aristocrat average.
Of course, REIT investing could be challenging in 2025 if interest rates begin rising again. The U.S. government is on track for $1.9 trillion in deficit spending next year, which could pressure inflation and trigger higher-for-longer interest rates. All else equal, rising rates make it more expensive for REITs to borrow money, cutting into profits.
However, this well-founded fear has pushed Realty Income to unfounded depths. Based on historical valuations, shares now have a 50% upside to fair value, making it a top stock to buy and hold for 2025. (I rank it a notch below Pfizer because of its downside risk.)
I introduced Sabre Corp. (SABR) in April as a stock to buy as interest rates begin to fall. The travel booking company is highly leveraged from private equity days, and falling interest rates reduce the strain.
Since that recommendation, shares have surged 50% as interest rate cuts take effect. The company’s interest expense declined in Q3 for the first time in 10 quarters and should continue dropping through 2025.
I’m adding Sabre as my No. 4 stock for 2025 as the company’s losses turn into profits. Analysts expect Sabre to notch $85 million in net income (its first positive figure since 2019), which it can use to renegotiate existing debts on better terms.
Travel demand is also rebounding. On December 5, Southwest Airlines Co. (LUV) became the latest airline to raise its fourth-quarter revenue outlook, citing encouraging revenue trends (i.e., higher bookings). JetBlue Airways Corp. (JBLU) had previously pointed to rising optimism after the November 2024 election.
That gives Sabre as much as an 80% upside from current prices. Though shares will remain volatile because of its high debts, the overall forecast is still for sunny skies ahead.
Growth-seeking investors should also consider Intuit Inc. (INTU), my No.5 pick for 2025.
The tax and accounting software firm is the leader in AI-based accounting. The firm was quick to add generative AI to its QuickBooks and TurboTax products, which makes it well positioned to become an “outsourced CFO” to small and medium-sized businesses that can’t afford a dedicated accounting team.
Tax changes for 2025 should reaccelerate growth. The incoming president has suggested he will implement sweeping overhauls, including tariffs, tax cuts on tips, and changes to how Social Security works.
This will create a bonanza for companies like Intuit, which saw a similar boost during Trump’s first presidency – with shares rising 38% in Trump’s first year in office alone. Some campaign promises – such as no taxes on tips – will spawn thousands of inventive ways to avoid taxes. (May I give you my PayPal information for a gratuity?)
Even if most of these measures don’t pass, the expiration of the 2017 Tax Cuts and Jobs Act will still lead to new legislation that businesses will need Intuit’s AI and software to handle.
My top five stocks for 2025 are all longer-term plays with at least six-month holding periods. My quant system is excellent at finding undervalued plays… but it doesn’t consider short-term moves.
That’s what makes Luke Lango’s Auspex system so fascinating. By analyzing stocks that are…
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Growing
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Sustainably moving higher
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And garnering positive attention
…the system can find stocks primed to break out within the next month.
The system works.
Auspex has now outperformed the market for five consecutive months for a small group of Luke’s subscribers. And if we look at back-tested data, the system would have returned 19,219% since April 2004 – an 18x improvement over the S&P 500.
On Wednesday, December 11, at 1 p.m. Eastern time, Luke will be giving a presentation on his new system that helps readers find the best stocks at the best time.
Auspex finds stocks that can deliver long-term gains in short-term holding periods, allowing you to get in, get out, and get paid while protecting yourself from market volatility.
Luke will be presenting his research for the first time to a wider audience at The Auspex Anomaly Event on Wednesday, December 11, at 1 p.m. Eastern time – where he will also reveal a free stock pick.
To reserve your seat for this event, and to set yourself – and your portfolio – up for the new year, simply click here.
I’ll be out for the next several weeks for the Christmas and New Year’s holidays. So, I will see you back here in 2025.
Regards,
Tom Yeung
Markets Analyst, InvestorPlace
Thomas Yeung is a market analyst and portfolio manager of the Omnia Portfolio, the highest-tier subscription at InvestorPlace. He is the former editor of Tom Yeung’s Profit & Protection, a free e-letter about investing to profit in good times and protecting gains during the bad.
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